Crypto daily reversal

Checked October 2026

Daily reversal buys coins that just fell on a quiet day and sells them the next day. Bianchi, Babiak and Dickerson published the volume-and-reversal result in the Journal of Banking and Finance in 2022. Backtoast ran a low-volume version. That version failed our test, losing 52% a year over 95,844 trades.

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Crypto daily reversal

The paper finds the next-day bounce is strongest after a move on low volume. So each day the rule buys the coins that fell most on below-normal volume, shorts the ones that rose most on below-normal volume, and holds for one day.

The paper sorts by the day's return and a volume shock together, into thirds within thirds. The run kept coins that traded less than their 30-day average that day, then bought the 30 lowest returns and shorted the 30 highest.

Bitcoin overreaction trades the day after an unusually big bitcoin day.

When it works

The paper treats short-term reversal as the return to supplying liquidity, so it pays most when liquidity is scarce, in small, thin coins and in volatile stretches when bid-ask spreads are wide. It found the highest expected returns around the ICO bubble at the end of 2017 and its burst in early 2018. Those returns assume limit orders filled at the close with no fees, so the version worth trying posts limit orders, as a market maker would, instead of paying the spread.

Origins

Bianchi, Babiak and Dickerson reported 1.22% a day for the equal-weighted version from March 2017 to March 2022 before costs, against 0.54% in high-volume coins, and they say it isn't a real-time recipe. The run is from late 2021 to September 2026.

The run is Backtoast's, from 29 October 2026, after costs.